What does it take to raise bitcoin nearly 20%? How about Tesla (TSLA) – Request report Chief Executive Elon Musk is just tweeting “#Bitcoin.”
That’s what he did on Friday morning, and bitcoin is now trading at $ 37,537.79, up 19%.
So what’s the takeaway from this? Retail investors are in a manic mode.
It’s one thing to push established companies like Amazon (AMZN) – Request report, Apple (AAPL) – Request report and Nike (FROM) – Request report, to stretched valuations.
But it is a completely different thing to go crazy about GameStop (GME) – Request report, AMC Entertainment (AMC) – Request report, specialty acquisition companies and bitcoin. It’s all speculation on this point.
Legendary 20th Economist John Maynard Keynes said investing in the stock market is like judging how others rate a beauty pageant.
In the case of bitcoin, the stocks with weak fundamentals and SPACs, each judge rates the assets with a perfect 10.
Nothing here is new. Given human nature, bubbles have almost certainly existed since the dawn of time. It is quite possible that Adam and Eve sparked a run on forbidden fruits. The 17th century saw the Dutch tulip bell and the 18th century saw the South Sea bubble.
You are no doubt familiar with more recent bubbles – dot.com stocks in the late 1990s and the housing market in the early 2000s.
Bitcoin, so-called junk stocks and SPACs are just a continuation of that line. Markets alternate between greed and fear, and at the moment greed is dominant.
Just remember that periods of greed, whether in the financial markets or any other area of life, generally don’t end well. For the most part, the greedy do not go unpunished.